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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ______________
Commission File Number 0-26710
CORE LABORATORIES N.V.
(Exact name of Registrant as specified in its charter)
The Netherlands Not Applicable
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Herengracht 424
1017 BZ Amsterdam
The Netherlands Not Applicable
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (31-20) 420-3191
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
The number of shares of common shares of the Registrant, par value NLG .03
per share, outstanding at November 8, 1996 was 9,467,300.
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<PAGE>
CORE LABORATORIES N.V.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
INDEX
Page
Part I -- Financial Information
Item 1 -- Financial Statements
Consolidated Balance Sheets at September 30, 1996 and
December 31, 1995 .......................................... 1
Consolidated Income Statements for the Three Months Ended
September 30, 1996 and 1995 ................................ 2
Consolidated Income Statements for the Nine Months Ended
September 30, 1996 and 1995................................. 3
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1996 and 1995 ............................... 4
Notes to Consolidated Financial Statements ................... 5
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations ................. 7
Part II -- Other Information
Item 1-- Legal Proceedings........................................ 9
Item 2--Changes in Securities..................................... 9
Item 3-- Defaults Upon Senior Securities.......................... 9
Item 4-- Submission of Matters to a Vote of Security Holders ..... 9
Item 5--Other Information......................................... 9
Item 6-- Exhibits and Reports on Form 8-K ....................... 9
Signature .......................................................... 10
i
<PAGE>
CORE LABORATORIES N.V.
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ ------------
ASSETS (Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ........................................ $ 1,469 $ 4,326
Accounts receivable, net ......................................... 23,419 22,540
Inventories ...................................................... 8,757 8,135
Prepaid expenses and other ....................................... 900 1,039
Deferred tax assets .............................................. 319 320
-------- --------
Total current assets ................................................ 34,864 36,360
PROPERTY, PLANT AND EQUIPMENT ....................................... 30,923 22,964
Less-- accumulated depreciation .................................. (5,959) (2,926)
-------- --------
24,964 20,038
INTANGIBLES AND GOODWILL, net ....................................... 8,221 8,513
DEFERRED DEBT COST, net ............................................. 46 35
LONG-TERM INVESTMENT ................................................ 250 400
-------- --------
Total assets .................................................. $ 68,345 $ 65,346
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ............................. $ 3,860 $ 2,500
Short-term debt .................................................. -- 190
Accounts payable ................................................. 3,342 5,430
Accrued payroll and related costs ................................ 2,138 2,974
Accrued income taxes payable ..................................... 781 613
Other accrued expenses ........................................... 1,693 2,461
-------- --------
Total current liabilities ........................................... 11,814 14,168
LONG-TERM DEBT ...................................................... 11,920 11,875
DEFERRED TAX LIABILITIES ............................................ 611 611
OTHER LONG-TERM LIABILITIES ......................................... 1,131 1,509
MINORITY INTEREST ................................................... 107 96
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preference shares, NLG .03 par value; 3,000,000 shares authorized,
no shares issued or outstanding ............................... -- --
Common shares, NLG .03 par value; 30,000,000 shares authorized,
9,466,800 issued and outstanding .............................. 166 166
Additional paid-in capital ....................................... 32,360 32,360
Retained earnings ................................................ 10,236 4,561
-------- --------
Total shareholders' equity .................................... 42,762 37,087
-------- --------
Total liabilities and shareholders' equity ................. $ 68,345 $ 65,346
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated financial statements.
1
<PAGE>
CORE LABORATORIES N.V.
CONSOLIDATED INCOME STATEMENTS
(In thousands of dollars, except share and per share data)
Three Months Ended
September 30,
--------------------------
1996 1995
----------- -----------
(Unaudited) (Unaudited)
SERVICES ........................................... $ 17,537 $ 13,361
SALES .............................................. 4,514 8,060
----------- -----------
22,051 21,421
OPERATING EXPENSES:
Costs of services ............................... 13,258 10,725
Costs of sales .................................. 3,845 6,505
General and administrative expenses ............. 840 757
Depreciation and amortization ................... 1,034 766
Other income, net ............................... (335) (45)
----------- -----------
18,642 18,708
INCOME BEFORE INTEREST EXPENSE, INCOME TAX
EXPENSE AND EXTRAORDINARY ITEM .................. 3,409 2,713
INTEREST EXPENSE ................................... 300 990
----------- -----------
INCOME BEFORE INCOME TAX EXPENSE
AND EXTRAORDINARY ITEM .......................... 3,109 1,723
INCOME TAX EXPENSE ................................. 995 528
----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM ................... 2,114 1,195
EXTRAORDINARY ITEM, net of taxes of $400 ........... -- (911)
----------- -----------
NET INCOME ......................................... 2,114 284
LESS - Net income applicable to preferred loan stock -- (111)
----------- -----------
NET INCOME APPLICABLE TO COMMON SHARES ............. $ 2,114 $ 173
=========== ===========
PER SHARE DATA:
Income before extraordinary item ................ $ .22 $ .15
Extraordinary item .............................. -- (.13)
----------- -----------
Net income per share ............................ $ .22 $ .02
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING ................ 9,532,514 7,001,583
=========== ===========
The accompanying notes to consolidated financial statements are an
integral part of these consolidated financial statements.
2
<PAGE>
CORE LABORATORIES N.V.
CONSOLIDATED INCOME STATEMENTS
(In thousands of dollars, except share and per share data)
Nine Months Ended
September 30,
-------------------------
1996 1995
----------- -----------
(Unaudited) (Unaudited)
----------- -----------
SERVICES ........................................... $ 50,695 $ 40,852
SALES .............................................. 18,155 16,998
----------- -----------
68,850 57,850
OPERATING EXPENSES:
Costs of services ............................... 39,338 32,548
Costs of sales .................................. 14,867 13,772
General and administrative expenses ............. 2,717 2,035
Depreciation and amortization ................... 3,030 2,140
Other income, net ............................... (382) (131)
----------- -----------
59,570 50,364
INCOME BEFORE INTEREST EXPENSE, INCOME
TAX EXPENSE AND EXTRAORDINARY ITEM .............. 9,280 7,486
INTEREST EXPENSE ................................... 934 2,663
----------- -----------
INCOME BEFORE INCOME TAX EXPENSE
AND EXTRAORDINARY ITEM .......................... 8,346 4,823
INCOME TAX EXPENSE ................................. 2,671 1,471
INCOME BEFORE EXTRAORDINARY ITEM ................... 5,675 3,352
EXTRAORDINARY ITEM, net of taxes of $400 ........... -- (911)
----------- -----------
NET INCOME ......................................... 5,675 2,441
LESS - Net income applicable to preferred loan stock -- (336)
----------- -----------
NET INCOME APPLICABLE TO COMMON SHARES ............. $ 5,675 $ 2,105
=========== ===========
PER SHARE DATA:
Income before extraordinary item ................ $ .60 $ .44
Extraordinary item .............................. -- (.13)
----------- -----------
Net income per share ............................ $ .60 $ .31
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING ................ 9,532,514 6,779,621
=========== ===========
The accompanying notes to consolidated financial statements are an
integral part of these consolidated financial statements.
3
<PAGE>
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
Nine Months Ended
September 30,
-------------------
1996 1995
------- --------
(Unaudited)(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................. $ 5,675 $ 2,441
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation ........................................ 2,737 1,924
Amortization ........................................ 300 374
Loss on early extinguishment of debt, net of taxes .. -- 911
Gain on sale of fixed assets ........................ -- (26)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable .......... 577 (2,199)
Decrease (increase) in inventories ........................ (622) 1,134
Decrease in prepaid expenses and other .............. 150 57
Increase (decrease) in accounts payable ............. (2,409) 1,275
Increase (decrease) in accrued payroll .............. (956) 578
Increase (decrease) in accrued income taxes payable . 168 (137)
Decrease in other accrued expenses .................. (1,144) (2,190)
Decrease in other long-term liabilities ............. (378) (139)
Other ............................................... 1 193
------- --------
Net cash provided by operating activities ........ 4,099 4,196
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets ..................... -- 1,234
Capital expenditures ................................... (3,991) (1,556)
Acquisition of Gulf States Analytical, Inc. ............ (4,310) --
Acquisition of Pastech, Inc., net of cash acquired ..... -- (5,017)
Return on investment in China Corelab Ltd. ............. 150 --
Final payment for business acquired from Western Atlas
International, Inc. .................................. -- (1,778)
------- --------
Net cash used in investing activities ............... (8,151) (7,117)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt ............................. (8,495) (31,000)
Borrowings under long-term debt ........................ 9,900 12,500
Decrease in short-term debt ............................ (190) (1,050)
Net proceeds from initial public offering .............. -- 30,026
Retirement of preferred loan stock ..................... -- (7,500)
Prepayment penalty on long-term debt ................... -- (140)
Dividends paid on preferred loan stock ................. -- (449)
Other .................................................. (20) --
------- --------
Net cash provided by financing activities ........... 1,195 2,387
------- --------
NET CHANGE IN CASH ........................................ (2,857) (534)
CASH, beginning of period ................................. 4,326 2,698
------- --------
CASH, end of period ....................................... $ 1,469 $ 2,164
======= ========
The accompanying notes to consolidated financial statements are an
integral part of these consolidated financial statements.
4
<PAGE>
CORE LABORATORIES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements include the
accounts of Core Laboratories N.V. and its subsidiaries (the "Company"), and
have been prepared in accordance with United States generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. Balance sheet information as of
December 31, 1995, has been taken from the 1995 annual audited financial
statements. For further information, reference is made to the consolidated
financial statements and footnotes thereto included in the Company's Form 10-K
filed with the Securities and Exchange Commission on March 20, 1996.
Net income per share is calculated by dividing net income available to common
shareholders by the weighted average number of common and common equivalent
shares outstanding during the applicable periods presented.
2. INVENTORIES
Inventories are primarily items held for sales or services provided to
customers. Inventories are stated at the lower of average cost (includes direct
material, labor and overhead) or estimated realizable value. A summary of
inventories is as follows (in thousands):
September 30, December 31,
1996 1995
------ ------
(Unaudited) (Audited)
Parts and materials ..................... $4,063 $3,468
Work in process ......................... 4,694 4,667
Total ............................. $8,757 $8,135
------ ------
5
<PAGE>
CORE LABORATORIES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(Unaudited)
3. LONG-TERM DEBT
Long-term debt at September 30, 1996 and December 31, 1995 is summarized in
the following table (in thousands):
September 30, December 31,
1996 1995
------- -------
(Unaudited) (Audited)
Unsecured Credit Agreement with a bank group:
$14,000 term loan facility .................... $10,000 $11,875
$7,500 revolving credit facility .............. -- 2,500
$15,000 uncommitted guidance facility ......... 5,780 --
------- -------
Total debt ................................. 15,780 14,375
Less-- current maturities ..................... 3,860 2,500
------- -------
Total long-term debt .................... $11,920 $11,875
======= =======
6
<PAGE>
CORE LABORATORIES N.V.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the Company's Form 10-K
filed with the Securities and Exchange Commission on March 20, 1996.
GENERAL
The Company is engaged in the business of (i) high-technology laboratory
services and (ii) the manufacture and sale of integrated octane measurement
equipment, process analyzer systems, and petroleum reservoir rock and fluids
analysis instrumentation. The Company is the worldwide leader (based on revenues
and laboratory procedures performed) in analyzing core samples from petroleum
reservoirs and in providing reservoir fluids analyses. The Company is also the
leading supplier of octane measurement systems for on-line process streams. Core
Laboratories currently operates 46 facilities in 16 countries and has
approximately 1,200 employees.
RESULTS OF OPERATIONS
The following table sets forth certain percentage relationships based on the
Company's income statements for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ---------------------------
Percentage of Percentage of
Total Revenue Total Revenue
------------- % Increase ------------- % Increase
1996 1995 (Decrease) 1996 1995 (Decrease)
------- ------ ---------- ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Services ........................ 79.5 62.4 31.3 73.6 70.6 24.1
Sales .......................... 20.5 37.6 (44.0) 26.4 29.4 6.8
---- ---- ---- ----
100.0 100.0 2.9 100.0 100.0 19.0
Operating expenses:
Cost of services ............. 60.1 50.0 23.6 57.1 56.3 20.9
Cost of sales ............... 17.4 30.4 (40.9) 21.6 23.8 8.0
General and administrative expenses....... 3.8 3.5 11.0 4.0 3.5 33.5
Depreciation and amortization....... 4.7 3.6 35.0 4.4 3.7 41.6
Other income, net............. (1.5) (.2) * (.6) (.2) *
---- ---- ---- ----
84.5 87.3 (.4) 86.5 87.1 18.3
Income before interest expense, income tax
expense and extraordinary item...... 15.5 12.7 25.7 13.5 12.9 24.0
Interest expense................. 1.4 4.6 (69.7) 1.4 4.6 (64.9)
---- ---- ---- ----
Income before income tax expense
and extraordinary item........ 14.1 8.1 80.4 12.1 8.3 73.0
Income tax expense............... 4.5 2.5 88.4 3.9 2.5 81.6
---- ---- ---- ----
Income before extraordinary item..... 9.6 5.6 76.9 8.2 5.8 69.3
==== ==== ==== ====
</TABLE>
* Percentage not meaningful.
Services revenue for three months ended September 30, 1996 increased 31.3% to
$17.5 million. Services revenue for the nine month period ended September 30,
1996 was up 24.1% or $9.8 million. The increases were primarily due to (i)
increased worldwide demand for reservoir core and fluids
7
<PAGE>
analysis, and (ii) additional revenue from the December 22, 1995 acquisition of
four laboratories from PACE Incorporated ("PACE Labs") and the January 5, 1996
acquisition of Gulf States Analytical, Inc. ("GSAI"). These increases were
slightly off-set by increased price competition in certain laboratory testing
markets.
Sales revenue for the three month period ended September 30, 1996 decreased
44.0% or $3.5 million compared to the same period of the prior year. Sales
revenue for nine months ended September 30, 1996 increased 6.8% to $18.2 million
compared to a year ago. The decrease in sales revenue for the quarter ended
September 30, 1996 reflects decreased sales of integrated octane-measuring and
process analyzer systems due to a weaker US refining market. The increase in
sales revenue for the current year nine month period was primarily due to (i)
additional revenue from the July 19, 1995 acquisition of Pastech, Inc.
("Pastech"), and (ii) increased demand for the Company's proprietary reservoir
core and fluids analysis equipment and systems. The increase for the nine months
ended was partially off-set by decreased sales of integrated octane-measuring
and process analyzer systems due to a weaker US refining market.
Costs of services as a percentage of services revenue for the three and nine
months ended September 30, 1996 improved slightly compared to a year ago, due to
improved cost savings and efficiencies.
Costs of sales as a percentage of sales revenue for the three and nine months
ended September 30, 1996 weakened slightly compared to a year ago, due to
decreased sales during third quarter 1996.
General and administrative expenses for the quarter ended September 30, 1996
were flat compared to the prior year. General and administrative expenses for
nine months ended September 30, 1996 were up $0.7 million compared to the
corresponding period in 1995, primarily due to costs associated with being a
publicly traded company and increased personnel costs due to growth.
Depreciation and amortization expense for the three and nine month periods
ended September 30, 1996 increased $0.3 million and $0.9 million respectively
compared to a year ago primarily due to capital expenditures for new equipment
and the acquisitions of Pastech, PACE Labs, and GSAI.
Other income for the three and nine months ended September 30, 1996 increased
$.3 million, primarily due to remuneration from the State of California for
property taken through rights of eminent domain in connection with road
construction.
Interest expense for the three and nine months ended September 30, 1996
decreased 69.7% and 64.9% respectively compared to 1995. The decreases were
primarily due to a reduction in debt after the initial public offering of 2.8
million common shares in September 1995.
The Company's effective income tax rate was approximately 32.0% for the three
and nine months ended September 30, 1996 compared to 30.5% for three and nine
months ended September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements are for working capital, capital
expenditures and acquisitions. For the nine month period ended September 30,
1996 the Company had operating cash flow of $4.1 million compared to $4.2
million for the corresponding period in 1995. Management believes the Company's
internal and external sources of cash will provide the necessary funds with
which to meet its expected obligations.
8
<PAGE>
CORE LABORATORIES N.V.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is (or may from time to time be) a named defendant in lawsuits
and is (or may from time to time be) a party in governmental proceedings from
time to time arising in the ordinary course of business. While the outcome of
such lawsuits or other proceedings against the Company cannot be predicted with
certainty, management does not at this time expect these matters to have a
material adverse effect on the financial condition or results of operations of
the Company.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Incorporated by
Exhibit Reference from the
No. Exhibit Title Following Documents
- ------- ----------------------- -------------------
27.1 Financial Data Schedule Filed Herewith
(b) Reports on Form 8-K.
None
9
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, Core Laboratories N.V., has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CORE LABORATORIES N.V.
by: Core Laboratories International B.V.
Dated: November 12, 1996 By: /s/ Richard L. Bergmark
Richard L. Bergmark
Chief Financial Officer and Treasurer
(Principal Financial Officer and
Chief Accounting Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,469
<SECURITIES> 0
<RECEIVABLES> 24,169
<ALLOWANCES> (750)
<INVENTORY> 8,757
<CURRENT-ASSETS> 34,864
<PP&E> 30,923
<DEPRECIATION> (5,959)
<TOTAL-ASSETS> 68,345
<CURRENT-LIABILITIES> 11,814
<BONDS> 0
0
0
<COMMON> 166
<OTHER-SE> 42,596
<TOTAL-LIABILITY-AND-EQUITY> 68,345
<SALES> 68,850
<TOTAL-REVENUES> 68,850
<CGS> 54,205
<TOTAL-COSTS> 54,205
<OTHER-EXPENSES> 5,365
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 934
<INCOME-PRETAX> 8,346
<INCOME-TAX> 2,671
<INCOME-CONTINUING> 5,675
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,675
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
</TABLE>
